Microsoft Has a Diverse Software Focused Patent Portfolio

Earlier this month, Microsoft and Google announced a settlement to end nearly 20 patent-related lawsuits in the U.S. and Germany. The deal brought to close years of patent litigation surrounding various technologies, including gaming systems, mobile devices, and multimedia streaming.

Envision IP analyzed Microsoft’s US patent portfolio to understand where the company has focused its patenting efforts, as well as to determine emerging technologies which Microsoft may be developing. At a high level, we identified 31,209 in-force, unexpired US patents owned by Microsoft and its subsidiaries. According to the company’s annual 10-K filed in July, Microsoft owns “over 57,000 US and international patents”. Also, according to Microsoft’s Patent Tracker Tool, the company owned 29,235 patents as of December 11, 2014.

Microsoft’s US patent portfolio is heavily weighted with software-related patents, with 61% of the patents directed towards software and computing processes. Non-software related utility patents comprise 26% of the portfolio, and design patents make up 13% of the portfolio. Interestingly, among the software-related patents, only 1,055 patents are in class 705 for business methods, which represents less than 6% of the software patent portfolio, and about 3.5% of the entire portfolio. While much attention has been placed in recent months around the viability of software patents, the true vulnerability for large patent holders lies in their business methods patent holdings, which were the subject of the Supreme Court’s Alice Corp. decision last year. Furthermore, business methods patents in particular have been increasingly targeted in various post-grant challenge proceedings at the USPTO. The relatively low percentage of actual business methods patents owned by Microsoft should mitigate the risk of widespread subject matter invalidity for the bulk of the company’s portfolio.

With regards to Microsoft’s design patents, 1,176 of these were acquired from Nokia, and they relate to various mobile device designs for cases, housings, keyboards, screens, and other ergonomic-related features for handhelds. The remaining 2,762 design patents are original Microsoft patents, and relate to user interface and hardware designs.

The vast majority of the company’s patents are directed towards operating system software (15.40%). The next largest categories are database and memory management (9.89%), GUI and screen visuals (9.83%), server and cloud-based technologies (9.52%), and security-related technologies (9.51%). Other major areas of patenting include multimedia transmission and delivery, email and messaging (including VoIP), search engine technologies, and online advertising and content personalization.

In addition to these major patenting areas, Microsoft owns patents related to wearable and head-mounted devices, augmented and mixed reality, and electronic payment processing and commerce, and automotive and driver-related technologies. While the company has already released products and services in some of these areas (i.e., with HoloLens and the wearable Band), the patenting efforts suggest further commercialization in the augmented and automotive spaces.

Microsoft does not appear to be an active acquirer of patents, and the majority of its portfolio appears to have been developed organically in-house. With the exception of the deal with Nokia, where Microsoft acquired over 1,200 patents (most of them being design patents), the company has acquired only 592 patents from third-parties since 1996 according to the USPTO’s assignment database. The notable acquisitions include 215 patents from Rockstar Bidco, which were originally owned by Nortel. In addition, Microsoft acquired 70 mobile computing patents from Danger Inc., and 60 augmented reality related patents from Osterhout Group.

Regarding US patent application filing trends, Microsoft’s filing activity peaked in 2005 with 4,930 applications. There has been a steady decrease in year-over-year filings since then. Filings rebounded between 2009-2011, but have since seen a significant decline, falling from 3,780 in 2011 to 2,823 in 2013. As patent applications publish 18 months after their earliest priority date, it will be interesting to see if the 2014 patent filing data shows a continued downward trend, and if a continued potential decline in filings may be attributed, at least in part, to the Supreme Court’s 2014 Alice Corp. decision.